Demonetisation to make mobile phones cost more

Mobile phone makers are set to increase handset prices by up to 5% as the rupee's record plunge against the US dollar has pushed up the cost of memory and display screen. This, despite the fear that price increase may further impact handset sales, already hit by the government's demonetisation drive.

“The industry has been holding onto prices till Diwali, but now it will get passed on. The plunging rupee will create additional pressure on import cost of components, which too is getting evaluated,“ said Sachin Thapar, country head at Innocom, a group company of contract smartphone maker Foxconn.

Indian rupee fell to an all-time low of 68.867 against the US dollar in intraday trade on Thursday before closing at 68.735 in the Indian foreign exchange market. The rupee has so far fallen about 3% this month.There are fears that it may plunge more -a big worry for consumer electronics firms as almost all the components are imported from China or elsewhere.

Handset makers said they have been absorbing increased prices of LED displays for the last three months to not disturb sales during the festive season, but now the input cost has increased, so they plan to pass on the price hike from next month onwards.

Two senior executives at large retail chains said that Indian brands are taking the first move towards price hike, with Micromax and In tex having already informed the trade. Market leader Samsung is also likely to increase prices a month later since it has enough stock of components at present, they said.

Email queries ET sent to these three companies did not elicit any response by press time on Thursday.

Shubhodip Pal, chief operating officer at Yu, a premium brand from Micromax stable, said it is looking at increasing prices around January .

Pankaj Rana, business head, mobility division, at Panasonic India, said the company is speculating the market condition, considering that demand is already down, before going ahead with any price increase.

Mobile phone sales have fallen by 3035% in the last fortnight over the preceding period because of the overnight de-legalisation of Rs 500 and Rs 1,000 notes, along with restrictions on cash withdrawals, as part of a government crackdown on black money . The move has led to a severe shortage of liquid cash. Researchers have estimated that this will lead to around 20% lower sales during the October-December quarter when sales typically jump.

Retailers meanwhile said prices of cellphone accessories such as memory cards, power banks, headphones, screen protectors and phone covers, too, are seeing a price increase of more than 10%.

“Since a lot of these are imported by smaller traders, they are passing on the higher import cost due to fall in rupee,“ head of a leading retailer said on condition of anonymity. “Also, a portion of the imports used to come under-invoiced, which has stopped due to demonetisation, pushing up prices,“ the person said.

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